Source: Succeed as Your Own Boss, 8/1/16
It’s no secret that small business owners face obstacles that perhaps don’t faze their larger competitors. A big company with its own legal department can stay apprised of EEOC and Department of Labor rules, and a company with its own HR department will know how to determine the salary to offer a new entry level employee.
But if you’re a small business owner, you can’t just talk to someone in your legal department to find out whether your business falls under new federal regulations, and you may not have a payroll department to ensure that your new employee’s paychecks have the right amount withheld from them. But being aware of the obstacles you’re likely to face is step one to coping with them effectively. Here are five obstacles small businesses commonly face today.
1. Dealing with Taxes
Small business owners often feel like they must walk a tightrope to avoid both overpaying taxes and making errors that can cost them dearly. Successfully coping with taxes and regulations generally involve enlisting in the help of experts such as an accountant or CPA. You need to use them as an advisor to your business because their have expertise in areas you can’t afford to get wrong. For example, scheduling an quarterly tax review with accountants is wise to ensure that you are tracking your profit claiming all the expenses to which you’re entitled and aren’t overpaying.
2. Increasing Revenues
Coasting on last year’s revenue levels isn’t going to work for the typical small business owner. Everything costs more which means you need to make more money. Maintaining healthy cash flow depends upon expanding your customer base and increasing revenues. Small businesses have to focus on increasing profit margins as well as on innovating to stay ahead of competitors.
3. Obtaining Advice on Health Insurance
The rising cost of healthcare has been a concern of business owners for 30 years or more, and it’s no mystery why. The Affordable Care Act (ACA) has highlighted several aspects of running a business that, when adjusted slightly, can result in big changes to the bottomline of a small business. For example, the employee headcount is important, particularly if it hovers around 50, due to mandated employer compliance for business with 50 or more FTE (full-time equivalent) employees. Offering health insurance that meets ACA requirements is a concern and cost driver. It’s best to check out insurance resources at your local chamber of commerce, trade association or contact a health insurance broker.
4. Hiring New Employees
Making a hiring mistake can be seriously expensive for the small business. You want to have an organized process for how you hire people. Will you do a mix of phone screening, email interviews and in-person interviews? Will the employee have access to business finances, if so you may need to do background and credit checks? And what is your process for checking references? Some hires could require five or more reference interviews. Bringing a new employee on board can be an expensive proposition. Then you need to develop at least a two-week training program for new hires. Onboarding costs represent a major investment for small businesses that must be careful to preserve capital. Once someone new is brought on and trained, employee retention becomes a concern. If you follow a detailed and through process, retention will be much less of a concern to your company.
5. Maintaining Cash Flow
Poor cash flow management is a significant problem for small businesses. It’s very common, some clients pay late, yet outstanding bills won’t wait for your customers to pay you, so you have to negotiate with your customers and vendors for favorable terms. Always try to get paid at least a third up front. Make sure you know someone in accounts payable so that you can make sure you can have a resources once your client starts paying late. Also you need to operate defensively in your business with more stringent budgeting, shorter billing cycles, utilizing a line of credit from your bank and maintaining a cash “cushion” can help to minimize cash flow issues.
If you have taken on the challenge of being a small business owner, then you already know what it means to face and overcome obstacles. Simply getting a small business launched requires overcoming hurdles and learning many new skills. Problems don’t go away once your business is established. The better able you are to anticipate them, prevent them, and deal with them before they become overwhelming, the better your business will run and the sharper your competitive edge will be.
For some issues, like tax withholding, business expenses, and payroll, hiring an good accountant to help you is an investment that can be invaluable. After all, tax mistakes can cost much more than the services of a tax professional who can help you prevent them in the first place. Other issues, like cash flow, require sustained discipline – similar to the discipline that helped you get your business off the ground.